IPO mania hits both sides of the Atlantic

Yesterday saw the start of conditional trading of shares for Glencore International, the Swiss based commodities producer, on the London Stock Exchange – this being the largest ever flotation in the UK on the London Stock Exchange, valuing the 20% of the company that was listed at over $9.9bn and subsequently making a significant number of employees decidedly better off in one fell swoop.

Simultaneously, LinkedIn completed its IPO on the New York Stock Exchange yesterday, raising an estimated $353m. Whilst not comparable in monetary terms, the LinkedIn IPO is certainly attracting as much press attention as the Glencore listing for the simple reason that at the end of its first day of trading its shares had hit $94.25 – a whopping 109% up from the issue price. Meanwhile Glencore, whose shares were massively over-subscribed, closed after conditional trading more or less at their offer price.

If you look at IPO deal activity since 2007, then it’s very, very clear that the IPO markets suffered from the economic downturn as a whole in 2008 and 2009. Completed IPOs in 2008 were down by 47.5% on 2007, and in 2009 were down by 33.7% on 2008. That said, the IPO market re-bounded strongly in 2010 with just under 1,700 IPOs completed raising over $270bn. This year has seen just under 550 completed IPOs so far – and the Glencore IPO will most certainly push up absolute deal values – but at this point in the year, 2011 is not looking as strong as the same time in 2010.

But what do the Glencore and the LinkedIn IPOs actually tell us about the market? Well, for me it is quite clear: you have strong companies like Glencore whose shares are massively over-subscribed from an institutional perspective – recognising the actual strength and historical performance of the company – yet the general investing public seem to be as eager to get their hands on the shares of LinkedIn, one of the new breed of tech companies who at this point still seems to have everything to prove.

Is this going to be another tech boom like we saw between 1999 and 2000?


Filed under: IPOs